## Assessing the Variability of Tax Elasticities in Lithuania

_IMF Working Papers, November 1, 2011_

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## Bibliographic details
- Authors: Tigran Poghosyan
- Published: November 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463925222.001

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### Overview
- Paper objective: Quantify the variability of tax elasticities in Lithuania using two alternative methods: rolling regressions and pooled mean group estimator.
- Motivation: Systematic variation of tax revenues observed over the economic cycle in the recent past.
- Primary emphasis: Importance of accounting for cyclical variation in tax elasticities when making short-term tax revenue projections.

### Methods
- Two estimation approaches used:
  - Rolling regressions.
  - Pooled mean group estimator.

### Key Findings
- Both methods confirm that tax elasticities moved with the economic cycle.
- Attributed drivers of cyclical movement:
  - Procyclical tax compliance tendencies.
  - Structural composition effects across tax bases.
- Comparative recovery dynamics for VAT revenue gaps across Baltic countries:
  - Tax revenues rebounded fastest in Estonia, followed by Lithuania and Latvia.

### Policy Implications and Recommendations
- Short-term tax revenue projections should explicitly account for cyclical variation in tax elasticities.
- Revenue forecasting and fiscal planning should consider:
  - Variations in tax compliance over the cycle (procyclical compliance).
  - Structural composition effects across different tax bases (e.g., VAT, corporate income tax, consumption).

### Subject Areas and Keywords
- Subject: Corporate income tax, National accounts, Private consumption, Revenue administration, Tax elasticity, Tax policy, Taxes, Value-added tax
- Keywords: Baltics, Corporate income tax, economic cycles, Lithuania, Private consumption, revenue gap, tax elasticity, tax revenue, Value-added tax, VAT, VAT collection, VAT elasticity, VAT revenue collection, VAT revenue growth, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/assessing-the-variability-of-tax-elasticities-in-lithuania-25364_